oo7Arb - Current State of Fund Trading

Discussion in 'Trading' started by Option_Attack, Mar 31, 2004.

  1. Gary, or anyone that trades mutual funds,

    I know you make most of your money with funds, so I was hoping you could offer us a few tips.

    1. Do you use a broker, or do you maintain accounts at several of the big fund houses like Rydex, Fido, etc? Some brokers/funds have hefty redemption fees, especially if you don't hold the fund for a certain length of time. What would you consider excessive?

    2. I know you like to find funds in "tight, rising channels" and scale into them. Do you use a scanner, or do you find these with just lots of chart review work?

    3. Looks like the fund reform bill won't pass, but if it does, do you see this as hurting your trading to a significant degree?

    Thanks for any help. :)
  2. 007Arb


    Dan, I trade at two fund supermarkets - Scottrade and Strong.

    I gravatated to funds because funds offer an edge like no other trading vehicle. Back in the old days in the 80s they had the U.S. Trading Championships. All sorts of brokers, market letter writers, some of Schwager's market wizards as well as John Q. Public participated in these contests. While some of the futures, stocks, and options traders may have made the most profits, it was the fund traders by far who saw the greatest percentage of participants as being profitable.

    The edge in short term fund trading though may be a thing of the past because of all the redemption fees. And datelining the foreign funds fpr a quick in and out profit is definitely a thing of the past.

    As for scanning the funds in tight rising channels I monitor the fund rankings at Morningstar for the best funds over the previous month as well as watching each day the funds making new highs per stockcharts.com and then checking those results through bigcharts.com

    As an aside, I'm not sure how much the redemption fees will hurt fund traders. In bear markets where you might have to do more in and out trading the fees will definitely be a problem. In bull markets like the 90s and the past year it doesn't pay to trade in and out all the time. I noticed in the latest Strategy Lab contest it was a fund trader who didn't trade in and out all that much that beat the other participants. This lady's (Janet Brown) service also is one of the highest ranked newsletters as tracked by Hulbert over the past 10 years and longer. It seems that the newsletters that trade the least beat the newsletters that are forever trading in and out.
  3. Thanks for the insight Gary!

    Looks like, as usual, traders must constantly adjust their methods to maintain their edge.

    Same old story :cool:
  4. volente_00


    i've seen it a few times on ECN's when the FED made emergency rate cuts. Talk about being screwed while being in a short position.